This study aims to examine whether the adoption of the International Integrated Reporting Council’s Integrated Reporting Framework (IIRC Framework) influences the extent of forward-looking disclosures provided by reporters.
This study captures forward-looking disclosures of Australian and New Zealand-based reporters by analysing integrated and annual reports over a period of 10 years from 2010 to 2019 using a machine learning algorithm. This study uses signalling theory to frame the analysis.
This study finds that the adoption of the IIRC Framework has a significant positive impact on the extent of forward-looking disclosures provided by reporting entities. The primary evidence suggests that while listing status alone negatively influences the extent of forward-looking disclosures, the additional analysis reveals that the acceptance of the IIRC Framework by listed entities is positively associated with an increase in forward-looking information. These results remain valid when subjected to a variety of robustness (alternative variables and country fixed effect) and endogeneity (system generalised method of moments and entropy balancing estimations) tests.
The findings have practical implications as regulatory agencies (including stock exchanges and standard setters), seeking to promote greater forward-looking disclosures, may want to encourage the adoption of the IIRC Framework.
The IIRC’s Framework promotes greater forward-looking disclosures benefiting stakeholders who gain a better understanding of the reporters’ future risks and opportunities (including social, economic and environmental risks) and how these are being managed/addressed.
This study provides novel evidence by highlighting the role played by the IIRC Framework in promoting forward-looking disclosures.
